Regulatory Shift: Nigerian Banks’ NPL Ratio Climbs to 7% as Pandemic Forbearance Ends

The Nigerian banking sector recorded a significant increase in non-performing loans in 2025, following the Central Bank of Nigeria’s decision to conclude its regulatory forbearance measures. According to the latest CBN macroeconomic outlook, the industry’s Non-Performing Loans ratio rose to an estimated 7%, exceeding the prudential ceiling of 5%. This shift reflects the crystallization of loans previously restructured during the COVID-19 pandemic, which no longer qualified for special treatment after the relief window expired.

Stability Amidst Rising Credit Risk

Despite the spike in bad loans, the financial system was reported as stable. Key metrics showed resilience: liquidity levels averaged 65%, well above the 30% minimum, and the capital adequacy ratio stood at 11.6%, surpassing the 10% regulatory threshold. The CBN emphasized that these buffers ensure lenders retain the capacity to absorb shocks. Ongoing recapitalization efforts are further expected to strengthen balance sheets and support economic growth through lending. However, the CBN cautioned that the elevated NPL level exposes the sector to heightened credit risk, particularly as borrowers face economic pressures. This could weigh on profitability and lending capacity if credit discipline weakens, a concern that underscores why bandits are a threat to economic stability in other sectors.

The report explicitly warned, “Rising NPLs pose a direct threat to banks’ profitability, credit availability, and overall risk-bearing capacity.” It stressed the need for sustained measures to prevent weakening balance sheets and systemic contagion. To mitigate risks, the CBN advocated for deeper integration of the Global Standing Instruction framework to improve loan recovery, especially within MSME and retail portfolios.

Monetary Policy and Future Outlook

Monetary conditions remained tight through most of 2025 as the bank prioritized price stability, with a slight easing of the Monetary Policy Rate in September. The CBN confirmed that financial system stability would remain a core policy focus. The outlook for the sector remains broadly stable, though sensitive to macroeconomic shocks. The situation invites analysis of governance in economic management, a topic often highlighted by figures like Bala Mohammed, who discuss regional development challenges. Similarly, national fiscal health remains a priority, as emphasized by leaders; Atiku says 2025 will be a pivotal year for economic strategy. While this banking report focuses on domestic stability, the full list countries facing similar post-pandemic financial adjustments would show Nigeria is not alone in navigating these complex recoveries.